Correlation Between Veolia Environnement and Stericycle

Can any of the company-specific risk be diversified away by investing in both Veolia Environnement and Stericycle at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Veolia Environnement and Stericycle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Veolia Environnement SA and Stericycle, you can compare the effects of market volatilities on Veolia Environnement and Stericycle and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Veolia Environnement with a short position of Stericycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and Stericycle.

Diversification Opportunities for Veolia Environnement and Stericycle

-0.61

Correlation Coefficient

Veolia Environnement  Stericycle

Excellent diversification

The 3 months correlation between Veolia and Stericycle is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and Stericycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stericycle and Veolia Environnement is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Veolia Environnement SA are associated (or correlated) with Stericycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stericycle has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Stericycle go up and down completely randomly.

Pair Corralation between Veolia Environnement and Stericycle

Assuming the 90 days horizon Veolia Environnement is expected to generate 1.27 times less return on investment than Stericycle. In addition to that, Veolia Environnement is 1.45 times more volatile than Stericycle. It trades about 0.03 of its total potential returns per unit of risk. Stericycle is currently generating about 0.05 per unit of volatility. If you would invest  5,074  in Stericycle on September 21, 2024 and sell it today you would earn a total of  2,776  from holding Stericycle or generate 54.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.47%
Values	Daily Returns

Veolia Environnement SA  vs.  Stericycle

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Stericycle

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Stericycle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite inconsistent fundamental indicators, Stericycle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veolia Environnement and Stericycle

The main advantage of trading using opposite Veolia Environnement and Stericycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veolia Environnement position performs unexpectedly, Stericycle can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stericycle will offset losses from the drop in Stericycle's long position.

The idea behind Veolia Environnement SA and Stericycle pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.